Category: FIRE

If you are a complete beginner at finances, or if you know someone who is, this episode is for you.

The biggest hurdle for beginners? Money seems complex and intimidating. But Scott Yamamura, author of Financial Epiphany, explains personal finance doesn’t have to be complicated. He breaks compound interest into three easy-to-grasp frameworks:

1. Money as a Multiplying Ability: Just like athletes have peak physical abilities in their 20s, your money has its greatest multiplying power when you’re young. At age 22, every dollar invested can multiply 16 times by retirement (assuming a 40-year career and 7.2 percent returns).

2. The Doubling Framework: Money can double approximately every 10 years with average market returns. This explains why a dollar invested at 22 becomes $2 by 32, $4 by 42, $8 by 52, and $16 by 62.

3. The Halving Concept: With each decade that passes, your money’s multiplying power gets cut in half. This is the inverse of the above idea.
Scott shares how these simple frameworks helped him front-load his son’s college savings. “We can stop now because it’s going to double,” he said.
For beginners struggling with analysis paralysis, Scott offers a Rubik’s Cube analogy: You don’t need to understand all 43 quintillion possible combinations to solve it — you just need one simple method to get started.

Similarly, you don’t need to master every financial concept to begin investing.

The most important step is just to get started. You can learn the complexities later, but starting early gives your money more time to grow.

Scott also emphasizes finding your “why” — a purpose bigger than just accumulating wealth. He shares a moving story about a man named Ernie who funded his mission trip to Sierra Leone, showing how money can be used to make a profound difference in people’s lives.

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Today’s question is different.

There’s something special about it — and you’ll understand why in a moment.

An 84-year-old listener left us a voicemail about his struggle to break free from mortgage debt. He and his 83-year-old wife need to move from their two-story townhouse because they can’t climb the stairs any longer.

They found a single-story ranch house that fits their needs perfectly — except for one detail: it carries a crushing $4,200 monthly mortgage payment.

They do have one potential escape route from this debt: selling their Florida condo, a vacation retreat that they haven’t visited in years due to mounting chronic health challenges.

But Hurricanes Milton and Helene ravaged their building last year. The storms spared their unit but destroyed the lobby and submerged their car in floodwater. The devastation slashed $100,000 from their property’s value overnight.

Now they face an agonizing decision: Should they accept this massive loss and sell the condo to free themselves from debt? Or would selling now, after such a steep drop in value, mean locking in their losses?

Joe and I have answered hundreds of questions from our listeners over the years. But this question is special. It comes from my Dad.
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Here’s the transcript of my father’s full question:

Hi Paula and Joe,

My name is Prahlad. I am 84 years old, and my wife is 83. We live in a two-storied townhouse in Atlanta and also own a two-bedroom condo on the beach as a second home in Clearwater, Florida.

Recently, we purchased a one-storied ranch home in Atlanta so that we don’t have to go up and down the staircase at this old age.

Our condo in Clearwater is on the 9th floor of the 14 storied building. We love the condo with views of the Gulf of Mexico and the Bay. However, we have not been able to visit it for a long time due to our underlying health conditions.

We purchased the condo for $400,000 in 2015 and it was estimated to have appreciated to $800,000 in 2022. Since then, the price was estimated to come down to $775,000 in the Spring 0f 2024.

As you know, this area was hit by two major hurricanes Helene and Milton in September and October last year. The lobby of the building was flooded with extensive damage and it is still under construction. The parking area under the roof was also flooded and our car was totaled. Fortunately, our condo did not suffer any damage.

There has not been any significant real estate buy and sell activities in this neighborhood since it was hit by the hurricanes last year. My real estate agent estimates that the current value of the condo is $700,000.

This building has been preparing for a major renovation of the plaza deck for the past few years, and we or the future owner anticipate to be assessed a large amount – maybe $30,000 – for the renovation.

We were hoping that we could sell the condo and pay off the mortgage for the ranch home we recently purchased in Atlanta, and be debt free.

What do you think – should we sell it now or wait until some later time – maybe until next year?

Your advice would be highly appreciated. Thank you both for what you do.

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